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Wednesday, 23 May 2018
Page: 4309


Mrs SUDMALIS (Gilmore) (12:15): I rise to talk about the Treasury Laws Amendment (Personal Income Tax Plan) Bill 2018. I've yet to meet a fair-dinkum Aussie who isn't trying to make the life and opportunities of their family better than the life experiences that they had. Our plan for personal tax is all about helping that come true for working families and individuals. A lot of young working people may not be so concerned about making provision for a family, but they do want to own their own apartment, they want to travel and they want more money in their pocket. So our personal tax system encourages aspirational Australians to get ahead.

So what does 'aspirational' mean? It means, 'I want to get better; I want to have a good time.' I speak to my young children—well, my youngest; the other two are pretty stable. She just wants to travel, get on and pay down her mortgage. She's not looking for family stuff, but she wants more money in her pocket, the sooner the better, and she'd like it for the next 10, 15 or 20 years, instead of the ATO taking a bigger grab as she increases her commissions.

I will just go back a little bit; I was talking about family. Our personal tax system encourages all of these people to get on, get better and have more money. The first step will provide tax relief to low- and middle-income earners, the second step will help tackle bracket creep and the third step will simplify and flatten the system. There are lots of people in the general community, and they're really not too sure about that term 'bracket creep'. Put simply, as you earn more money, your taxable income jumps into a new level and the taxman takes more from your pay packet. Together, the reforms we're putting forward with the company tax changes, tax integrity measures and personal income tax changes will eventually build a much simpler system. It'll reward those hardworking Aussies who almost jump over into a new level, so they've got more money to spend, they've got more money to save, they've got more money to pay down their credit cards and they've got more money to pay down their mortgage. Ultimately, this drives a stronger economy.

Step 1 gives immediate tax relief for low- and middle-income earners to help with the cost of living pressures. The income tax offset will provide tax relief of up to $530 to low- and middle-income earners for the next four years. I heard a comment from the previous speaker that $10 a week would be better put to them as a tax cut rather than waiting until the end of the year. I would argue with that. People don't tend to save the $10 a week, but getting a tax refund cheque of $530 gives them the ability to go and buy something that they hadn't thought of buying on the way through, or it gives them the chance to throw it onto an electricity bill or put it towards something special. But $10 a week is not so practical. Ultimately, having that offset for the next four years is going to help over 10 million Australians. Around 4.4 million people will receive the full benefit of $530 in the coming financial year, as from July. It's pretty cynical not to think that's a good idea. The benefit is in addition to the existing low-income tax offset, and it will be available on assessment after the taxpayer lodges their tax return. There are two parts to that. You get rewarded for putting your tax return in early, saving the tax office even more money because they don't have to chase you to put your tax return in.

The second part is all about that bracket creep I mentioned. We're planning to expand tax relief to help protect those middle-income earners. From 1 July this year, the government will provide a tax cut of up to 135 bucks a year to around three million people. It mightn't sound like much, but it will make a difference. This means that people earning just under $87,000 can stop being concerned that if they get extra pay it'll suddenly push them to a higher level of tax payable. From July, it will only kick in after you earn over $90,000 per year. These earners will only pay 32.5 per cent tax. That's about the same as the company tax rate as it was in years past.

When the low- and middle-income tax offset concludes in 2021-22, the benefits will be locked in by increasing the threshold of the 19 per cent tax bracket from $37,000 to $41,000. Let me tell you: that's a lot of people living in Gilmore. That's a massive benefit to the people living in Gilmore. We don't have a lot of people earning those top levels, but that will certainly make a difference for the people living in my region. From 22 July, the top threshold will be the 32.5 per cent. That's a cut of over $1,300 bucks a year. I would encourage all of those—and there are some—to be very happy about that. There are some people in my region who will be very happy about that.

The whole idea is about making personal taxes simpler, and I have tell you: we all want that. I can say that even as a past employer. I have here copies of this week's tax scales. We all want tax to be simpler, making it much easier. Luckily you have this on the computer now, but in the old days you had a little plastic book, and for each person whose tax you paid you'd go through their book, align how many dollars they'd earned, find out if they were on the tax-free threshold, write down on their payslip how much tax they paid and record it in your notebook—because it wasn't on the computer back then—and at the end of the year you added it all up and, each year or each fortnight, you slugged it off to the taxman. It was very cumbersome. That's the aim: if we end up with a flatter system, it is going to make it so much easier for everyone.

So, yes, it's going to be good. From July this year the government will provide a tax cut of up to $135 for three million people, and that will be great. Making it much simpler would definitely be better and I know that people will appreciate it. That flattening of the tax system means that, ultimately, 94 per cent of all taxpayers in Australia will only have to pay 32½c in the dollar. Ninety-four per cent of working Australians will only have to pay 32½ per cent. For a lot of Australians, that will make one of hell of a difference. Currently, some of them are up on 48 cent. That means the tax man grabs almost half of what you earn, so half of what you earn is gone. As I was explaining to a radio journalist this morning, if you have a family who are split and one of those partners is paying child support, a third of their income, give or take a bit, goes off to the tax department, but their assessment for child support is on the whole lot, so roughly another third goes off to the child support agency. That leaves that person with a whole lot less money to spend either on a new family or on trying to be stable and have a home. So changing this whole tax regime has a domino effect of benefit not just for the taxable income but for living and surviving, and there are a lot of people who are going to be really appreciative of that. For that 94 per cent of Australians, the working Australians who are only going to be paying 32 per cent or less, it will be a great achievement. Compare that with 63 per cent if we don't make any changes at all. If we don't make any changes at all to this system, only 63 per cent will be in that 32½ per cent bracket.

A lot of people are saying: 'Well, it's such a hard ask to change the tax schedules. It's such a hard ask to get anything like this through the House. Why would any government bother to change the tax system? We've had it for years.' Some would say, 'Ah, well, too bad; too late; too hard.' The answer is that right now that scale of personal income tax simply isn't fair. If people want to get ahead, earn more money and make changes in their life financially then the ATO is likely to take a bigger chunk of your pay packet than you'd really like.

During my village visits around Gilmore, I have met both older and younger residents who have thought about economic issues. Initially I found it curious that people would come and talk to me in a coffee shop and say, 'I've been thinking about tax.' I'm thinking: 'Why? Why are you thinking about tax? There are so many other things to think about. But, anyway, go ahead.' Some of the more mature people come to me and they say, 'It'd be a whole lot easier if there was just a flat rate from go to whoa. I used to be an employer, I used to employee people and it was so difficult. It would be so much easier.' I thought, 'Okay. I love it. I'll write it down and send it off to the minister and see what happens.' Right now, trying to get a single rate across the board through is going to be pretty difficult, but the good thing is that we can at least start.

Addressing that sort of a legislative change is pretty mammoth. Right now, we have the aim to have lower, fairer and simpler taxes—a system that is fair for all Australians, rewards all Australians and makes people think about earning more money instead of saying, 'No, I'm not going to take an extra shift, thanks very much. It will shove me into a different tax bracket. No, I don't want to do that because it's going to cause me more financial grief.' What! We want to encourage people to work more. It should be in our DNA: work more, enjoy more, save more. To build a stronger economy, it's vital that every worker is rewarded rather than penalised by the tax system for their efforts.

I bet that most of my constituents—in fact, most Australians—are not aware that personal income tax contributes over half of the government's tax revenue. So it's really, really important to get these settings right and build a tax system that's fair and financially responsible. The tax burden borne by workers has continued to rise, and that's okay. You could talk to any working person and they would said, 'That's okay. I don't mind paying my fair share of tax'—well, most of them; thankfully we're chasing those who are saying, 'I don't want to pay tax. I'd rather go under the table.' Most of them say, 'I want to help build the local roads and I want to help support the local schools.' They're happy with that, but they want it to be fair. When more than half of our revenue comes from income tax, we've really got to get it right because there will come a point in time when people will say, 'It's too hard to work. I'm in too high a tax scale. I'll just go on income support from the government.' Bracket creep reduces that and now we have to change that. We have to make sure that there's incentive to work hard, take risks and succeed. There were 2.4 million Australians with taxable income above $87,000 in 2015-16, representing about 23 per cent of taxpayers, but they were paying 65 per cent of the personal income tax. The government's seven-year Personal Income Tax Plan will improve the incentive to strive for success by providing low tax to middle- and low-income earners to combat bracket creep and flatten the system, as was suggested by those strange people coming to my village visits. They'll be very, very happy. We need to protect the middle-income Australians for the rest of their working life. We need to encourage them to keep working.

The plan delivers a tax system and encourages aspirational Australians to get ahead. Individuals will be able to take on more work and seek advancement knowing that their income will not be grabbed by the tax man. Nobody wants that secret hand coming over the back of the paymaster's shoulder, saying, 'Got ya! I'm taking more of your money. You might be able to get back some in your refund, but probably not.' The plan is affordable and it's funded. The coalition government is pretty good at this. Financial management is our major strength. We're good at it. We're good money managers—very good money managers. In the budget this year, we've turned a corner. As I've been explaining to a number of people, when you stop borrowing money to pay down debt—because that's like taking out a new credit card to pay down a credit card you've already got—you actually get more and more into debt. We've turned that corner. We've thrown that second credit card away and now we're paying down the first credit card. That's fiscally responsible—a big word. It just means we're taking care of taxpayer dollars, and that's incredibly important.

Together, our reforms for company tax, tax integrity and personal income tax changes will make a much simpler system, will reward our hardworking Australians and will drive a stronger economy. There is no question that this must go hand-in-hand with changes to the whole scheme. I often find that the other side will pick half an argument and argue against it, when this is not a simple issue. Tax is never a simple issue. You have to combat it from both sides. You have to pull money from here and push money there. Part of this whole structure is about changing the whole plan for economic stability and tax fairness and ultimately making Australians really, really happy with the outcome of how we're spending their money from the tax we do collect but also allowing them to have more of their own money to spend on what they want to spend it on.